Microsoft defends the Xbox One’s licensing, used game policies

Xbox marketing chief talks to Ars about the benefits of the move to a "digital world."

Gamers are trying to get the attention of Yusuf Mehdi, vice president of marketing for Xbox.

Kyle Orland

"This is a big change, consumers don't always love change, and there's a lot of education we have to provide to make sure that people understand."

This is the extremely diplomatic way Microsoft Xbox Chief Marketing and Strategy Officer Yusuf Mehdi spun his reaction to the PR challenges surrounding the Xbox One of late. And it's true, consumers around the world (and around the Internet) loudly expressed how much they dislike the changes Microsoft announced to its game licensing terms (and online requirements) for the Xbox One last Thursday, giving Sony the ammunition it needed to win E3 by basically doing nothing.

The reaction wasn't a surprise to Mehdi, though. In fact, he said a lot of the way people have responded to Microsoft's moves was "kind of as we expected." But the implication of his statements in an in-depth interview with Ars Technica was that this temporary confusion and discomfort among the audience would be worth it as gamers and consumers adjust to a console world without game discs.

"We're trying to do something pretty big in terms of moving the industry forward for console gaming into the digital world. We believe the digital world is the future, and we believe digital is better."

Mehdi made a comparison to the world of home movie viewing, where inconvenient trips to Blockbuster Video have been replaced with Netflix streaming on practically every TV-connected device. On Xbox One, having all games exist as cloud-connected downloads enables new features like the ability to access your entire library at a friend's house with a single login or loaning games to up to ten "family members" digitally and remotely.

It’s a “family” affair

Since its announcement, there has been some confusion over the details of sharing your Xbox One game library with up to ten "family members." Mehdi couldn't give comprehensive details, but he did clarify some things.

For one, a family member doesn't have to be a "blood relative," he said, eliminating the extremely unlikely possibility that the Xbox One would include a built-in blood testing kit. For another, they don't have to live in the primary owner's house—I could name a friend that lives 3,000 miles away as one of my "family members" Mehdi said.

You'll be able to link other Xbox Live accounts as having shared access to your library when you first set up a system and will also be able to add them later on (though specific details of how you manage these relationships is still not being discussed). The only limitation, it seems, is that only one person can be playing the shared copy of a single game at any given time. All in all, this does sound like a pretty convenient feature that's more workable than simply passing discs around amongst friends who are actually in your area.

Those digital "benefits" will be available at launch, but Mehdi hinted that the digital rights management transition might unlock some more interesting game access and distribution methods later on. "In the future, you can imagine the capability to have different licensing models, different ways that people have to access games. This all gets unlocked because of digital." He wouldn't get drawn into details, but when I suggested ideas like an "all-you-can-play" Netflix for games or purely digital game rentals, he didn't shoot me down. "Sure. It could be a variety of ways."

Mehdi also suggested that the transition to a world of strictly downloadable and online-connected games would help allow for "a diversity of business models" for publishers to take advantage of, from free-to-play titles to $60 AAA games to Xbox Live Arcade games somewhere in between. "As you go into a digital world, what's happening is publishers are choosing to have different business models, and consumers are saying 'Hey, if I can't resell the title, provide me a different way to get value to get into your game.' And we think the market will be efficient in finding good models that work for consumers." In essence, Mehdi said, consumer demand for good value from games will drive prices down, even if a publisher decides to fully cut off the market release valve of used game resale.

Publishers, of course, have been the most forceful proponents of cutting off the used game market, with some suggesting that used games are comparable to piracy for their bottom line. But Mehdi said that Microsoft wasn't simply "giving in" to publisher demands with its new game licensing terms. Instead, it was trying to balance the needs of its four main "constituents," including the consumer (who comes "first and foremost" he said), game publishers, retailers, and Microsoft itself as a company.

"Within that, we've tried to optimize, and I think we've found a great balance across all of those dimensions," Mehdi said. "But there are tradeoffs. We do want to support everyone in that system, beginning with the consumer. But we want publishers to get paid for the great IP they work on. We want retailers to be able to drive and sell our products and make a profit. So we are trying to balance across all those."

Mehdi noted that purely digital game marketplaces like the iOS App Store have thrived despite having absolutely no physical media. Implementing that kind of disc-free system on the Xbox One "may not [have been] the best thing for consumers, and it may not [have been] the thing they [would have] wanted," Mehdi said, which is part of why Microsoft decided to keep discs as an option. Still, he did concede that, without discs, the licensing norms for the system "would be easier to understand."

The way Mehdi talked about Microsoft's licensing decisions reinforced the idea that he saw the limited abilities to share and transfer Xbox One games as a step up from other, purely digital marketplaces, even if some others see it as a step down from current disc-based distribution systems. On the Xbox One, Mehdi said the company has "tried to… bridge the two in a way that no one has done—to give you the power of digital and then give you all this power in physical. … We know we're providing a lot more value to consumers, but in that comes a lot of need to clarify 'how come disc, how come digital, how's that work?'"

While the Internet is decidedly up in arms about the way the Xbox One handles game ownership and online check-ins, Mehdi said it was "hard to say" what the larger reaction from the less attentive mainstream consumers would be. "I think it's fair to say there's a segment of consumers at this show in particular who really pay attention, who are very passionate about all aspects of gaming, and that we listen to closely. In a broader set of community, people don't pay attention to a lot of the details. We've seen it in the research, we've seen it in a lot of the data points."

One data point in particular Mehdi pointed to was the success of the initial pre-orders for the Xbox One, which started as soon as Microsoft's press conference concluded Monday. "Amazon basically says they are on path to sell out… Amazon is saying it's one of their best-selling consumer products. We're seeing the same thing from other retailers." To be fair, PlayStation 4 pre-orders were also a quick sell-out on Amazon after the company's press conference on Monday. Still, "it's very clear there are a wide variety of other consumers that love to game that are excited about what we have to offer with Xbox One," Mehdi said.

While the Xbox One will sell for $100 more than the PlayStation 4, Mehdi suggested that the extra money spent would be worthwhile to consumers looking for the "best value" in their next gaming system. Besides exclusive titles and gaming content, Mehdi said players would see value in the system being "backed by 300,000 servers backed by Microsoft that enable incredible game experiences." Also, Mehdi said, the Kinect in each box provides for better gameplay and "ease of use for the entire system." Things like live TV support and exclusive NFL and Skype partnerships will also help show consumers the Xbox One's "tremendous value."

"We want to have our offering be differentiated relative to all others," he said. "It has value that is in so many areas that is not in competing systems… That is a thing that each consumer will choose… and ultimately consumers will decide which is better. It's a big market."

748 Reader Comments

Too little, too late for Microsoft this round. Sony destroyed them at E3, and it's clear who takes the crown with this upcoming generation of consoles.

Sony's PS4 hardware is superior, their online subs are cheaper, no always-on bullshit, no mandatory spy-cam in your bedroom, 48 game titles at launch, such as Kingdom Hearts 3. They simply blow the XboxOne out of the water.

Sony takes the prize. Nintendo not even really a contender. Microsoft eats the dogfood.

Mehdi suggested that the extra money spent would be worthwhile to consumers looking for the "best value" in their next gaming system media center.

FTFY.

From what I understand about the hardware so far, the XBone is way more about being a central point of media than of gaming. IIRC comes with 8GB, but only 5GB are available to game developers. Please, correct me if I'm wrong, but seems the PS4 is much more gamer centric.

I'm as unhappy with Microsoft for their confusing, badly projected message as I am for what they are trying to do with the Xbox One. If they had just been straight with their loyal community, of which I counted myself as up to a few days ago, we might have been more supporting of their push into all digital. Instead they delayed, then released only tiny snippets of their overall policy, stumbled around contradicting each other, and then finally came clean. What could have a new approach for gamers to ponder was now seen as purely bad news, and it is completely Microsoft's fault.

As it is I signed up for a PSN account today, something I never thought I'd do.

Once the dust settles and smoke clears, I think people will warm up to Xbox way more than people here seem to assume.

One thing I don't understand is how come nobody mentions that PS4's $400 price tag doesn't include the Eye camera while Xbox One includes Kinect? It was weird watching pages and pages of people going ape over the news of Xbox price yesterday without any mention of that. Sure I understand some people don't care for Kinect, but I think a lot of people do want the next gen Kinect.

Part of the problem with Microsoft's new business model for the Xbox One is that if and when Microsoft decides to stop supporting Xbox Live on the Xbox One is that it will render it and your entire game collection useless. I may be a minority but occasionally I still pull out my NES and Dreamcast to play classic games that never get old, even if the hardware is ancient compared to today's PC's and gaming consoles.

Once the dust settles and smoke clears, I think people will warm up to Xbox way more than people here seem to assume.

One thing I don't understand is how come nobody mentions that PS4's $400 price tag doesn't include the Eye camera while Xbox One includes Kinect? It was weird watching pages and pages of people going ape over the news of Xbox price yesterday without any mention of that. Sure I understand some people don't care for Kinect, but I think a lot of people do want the next gen Kinect.

I think most people who own a Kinect, at least people I know, hardly ever use it and so being forced to spend another $100 is a factor when deciding which console to purchase.

No different than how I have been playing games on the PC for a while now via Steam, perfectly happy with it, is there a bit of 'but we have always done it this way!' from the community? Should the conversation be about better ways to distribute content, which Steam has proven works very well on a digital framework? I may disagree with some other aspects of the Launch, but personally do not see a problem with digital distribution and the 'perceived' limits others see. You buy the right to play a game in practical perpetuity, that's all.

What I would like to see is the kind of price levering that digital distributions afford reflected on the cost of games in the future.

MS have become very customer unfriendly of late, Windows8 touch UI for the desktop, no start menu, Surface tablet more expensive than the iPad with less storage, the Xbone more a multimedia device than games player, NSA listening device installed at no extra charge.As for games getting cheaper with the death of the second hand market I'll believe it when I see it.

"We're trying to do something pretty big in terms of moving the industry forward for console gaming into the digital world. We believe the digital world is the future, and we believe digital is better."

I wonder if this guy realises that computer games have always been 'digital'.

I guess we don't quite have a word for what he is really talking about; and in fact, what he is talking about is not easy to define precisely. "Purely digital" is a term that comes to mind (and is used by the author of the article), but that term still isn't quite right. Obviously the digital data has to be stored somewhere. After it is downloaded, it is stored on the consoles hard drive. Before it is downloaded it is stored on some server somewhere on who-knows-what kind of storage, but is that really so different to just downloading it from a local optical disc?

I suppose what we're talking about is "medium agnosticism" or something like that... but that's not a very catchy phrase.

Since it's so tricky to precisely define the line between 'digital' as games have always been and 'digital' as this marketing guy describes, perhaps this shift to the 'digital world' for games isn't as big of a deal as he is making it out to be. ie. he isn't really talking about the benefits of going digital, but rather the benefits of a particular kind of DRM and content management.

Seems pretty reasonable to me. The XB1 is a lot less affronting if you think of it as a digital distribution service with disc-capabilities added in.

None of that stuff bothers me: I've gotten used to all that stuff on Steam. The only really valid point I have to make is that, following Steam, they should add a 'real' Offline mode - i.e. you should be able to play your games offline, but they are limited in that online capabilities don't work (obviously) and you can't add new games to your library without a connection.

Basically, make it work like Steam's Offline mode: it's designed to be used with an internet connection and assumes you'll have one most of the time, but there is some fallback for situations where you haven't got a connection.

I think most people who own a Kinect, at least people I know, hardly ever use it and so being forced to spend another $100 is a factor when deciding which console to purchase.

Maybe. But a lot of people, generally, fall for all the hype and buy a product based on that hype. Personally for me, I will wait for a couple of years and see how all this next-gen war pans out and then buy the system that suits me.

For those comparing steam to this console. Please try and remeber that on a PC you have the option of not using steam and getting most of the games on steam from elsewhere. On the XBoned you do not get this 'luxury'.

Once the dust settles and smoke clears, I think people will warm up to Xbox way more than people here seem to assume.

One thing I don't understand is how come nobody mentions that PS4's $400 price tag doesn't include the Eye camera while Xbox One includes Kinect? It was weird watching pages and pages of people going ape over the news of Xbox price yesterday without any mention of that. Sure I understand some people don't care for Kinect, but I think a lot of people do want the next gen Kinect.

I think most people who own a Kinect, at least people I know, hardly ever use it and so being forced to spend another $100 is a factor when deciding which console to purchase.

I get that. But for me and several others I know, we wouldn't have bought our Xbox 360 if it didn't have the original Kinect. It will be true for Xbox One also. And how do people know they won't like the next gen Kinect which is apparently much more powerful? Overly negative reactions seem mostly knee-jerk types and I am not sure they will carry over when they have to make final purchase decision later this year. We will see.

Mehdi made a comparison to the world of home movie viewing, where inconvenient trips to Blockbuster Video have been replaced with Netflix streaming on practically any device instantly.

Hmm, I think I'll watch some South Park on Netflix streaming, or maybe some Starz! movies, or perhaps an episode of Spartacus. . . . D'OH!

With a disc it's there in 10 years. With a Netflix streaming model you have no idea when the DRM authentication servers will shut down, or a publisher will pull their titles from the MS digital store.

I can still buy used PS1, PS2, PS3, and 360 games from eBay, garage sales, Amazon used sellers, anywhere. With X1 I _might_ be able to find a used and out-of-print disc at GameStop for $5 off list price. Maybe.

PS4 offers digital downloads just like PS3, Vita and X1. But it also gives me the choice of discs that should still be playable in 10 years.

"Mehdi noted that purely digital game marketplaces like the iOS App Store have thrived despite having absolutely no physical media."

The bulk of the apps in the iOS App Store don't on average cost $40-$60. It's one thing to buy an app for $1-$5 and then forget about it when it's for-filled it's usefulness.

For them to say the used game market is akin to piracy explains it all right there. This is all driven by the quest for more profits. GameStop is making millions off of the used game market and they want a piece of that action.

I'm all for a company to choose to do whatever they can to increase their profit margin, but I too can choose not to buy their product.

I'm someone who only pays for physical copies, but even I understand why Steam is so popular: it's cheap and reliable. Not only will Microsoft's "shift to digital distribution" not be cheap, it will also be irrevocably tied to their hardware and services.

I used to enjoy PC gaming, but it's visions of the future like Microsoft's here that see me enjoying the tangibility of a console. They can whine all they like, but Sony isn't spitting into the wind and they're going to do fabulously this generation.

As you go into a digital world, what's happening is publishers are choosing to have different business models and consumers are saying 'hey, if I can't resell the title, provide for me a different way to get value to get into your game.'

I guess getting cheaper games is out of the question though. Seriously, if the guy claims this system will benefit gamers, what better way to show it by having cheaper games a-la Steam?!

No different than how I have been playing games on the PC for a while now via Steam, perfectly happy with it, is there a bit of 'but we have always done it this way!' from the community? Should the conversation be about better ways to distribute content, which Steam has proven works very well on a digital framework? I may disagree with some other aspects of the Launch, but personally do not see a problem with digital distribution and the 'perceived' limits others see. You buy the right to play a game in practical perpetuity, that's all.

What I would like to see is the kind of price levering that digital distributions afford reflected on the cost of games in the future.

That is a good point, but let's see if they do in fact lower the pricing of their games. I've sold and traded old games for my Atari and Nintendo to my Commodore 64 and Amiga. I embraced Steam mainly because of their pricing.

Try getting excited about 'always on' when you live outside the US or Europe... In South Africa the cost of data alone makes this a tough call, but add total unreliability once you are 'connected' and it quickly becomes a frustration not worth having. Data provision is not reliable all around the world and for Microsoft to change the distribution model as they have is basically the same as saying 'scr3w you' to the rest of us living outside the highly connected cities in the US, Europe and Asia. Sadly I now face a choice - having owned a Xbox 1st gen in London and two second gens since moving back to ZA, I may have to say goodbye and move on to Sony. Not an easy choice.

Btw also have a kinetic and once the hype died down in our house, it has been pretty much useless, so I do not believe the price difference is justified to me personally.

I'm not going to buy XBox One because of the online requirement. My job requires me to move around the world and many of those places don't have broadband access. Too bad Ars didn't think to ask about how the online requirement is going to impact deployed military.

And as pidge says, the structure of this console ensures that it will be wholly obsolete at some point, where as every other system up to this point can always be hooked up and played.

I'm fully expecting that online distribution of games is goign to result in permanently high prices. I'm not interested in paying launch prices as I have a limited amount of gaming time. I'm fairly certain that this is going to kill my console gaming habits entirely.

Microsoft should release the "For Dummies" version of its lending games policy, because no one he's getting it (or I am getting it all wrong).

Here we go (according to the sidebar "It's a "family" affair" in the article):

Step 1: Buy the game (duh!)Step 2: Pick a friend in your "family" listStep 3: Share the games with himStep 4: Take a beer from the fridge, because you just lent a game to your friend without leaving your own home.

Too little, too late for Microsoft this round. Sony destroyed them at E3, and it's clear who takes the crown with this upcoming generation of consoles.

Sony's PS4 hardware is superior, their online subs are cheaper, no always-on bullshit, no mandatory spy-cam in your bedroom, 48 game titles at launch, such as Kingdom Hearts 3. They simply blow the XboxOne out of the water.

Sony takes the prize. Nintendo not even really a contender. Microsoft eats the dogfood.

I don't know what source you have that allows you to determine that the PS4's A10 platform is superior to the likely nearly identical architecture of the Xbox One (that has yet to be discussed) and would like to know what you seem to know that no one else does outside of NDA signed developers. We don't even know so much as the memory type or controller for the Xbox One yet so it is impossible to compare, the most we know is the amount of RAM and that Microsoft has a $3 Billion contract with AMD to supply APUs for the Xbox One - that and it is supported by Windows Azure cloud computing.

As for games, I'm only aware of 2 console exclusives for PS4 vs about 4 shown for Xbox One. Due to both consoles having nearly identical architecture almost every game (save for the ones Microsoft/Sony are willing to buy out half the sales of) are multiplatform - this includes Kingdom Hearts 3. I am of course not including games that have long been out on PC that are finally making their way to console.

The once-a-day DRM requirement is just an excuse to keep you connected to the internet. What M$oft really is doing is watching everything you do with Kinect and recording which TV shows you watch. Kinect can detect if you appear to be overweight, have complexion problems, if you had pizza or chinese dinner on the coffee table, etc. So you'll get advertisements for health club memberships, skin care products, and coupons from every pizza and chinese place in the neighborhood. Is this "moving forward"? Maybe, but it certainly is an intrusive invasion of my privacy. There will be no Xbox One in my living room, ever.

Also, about the "how will I play the games 10 years into the future?" part: didn't EA just patched a Mass Effect game to remove the online pass stuff? It's perfectly plausible to think that the 24hr check can be removed when the next-next generation comes.

Lets not fool ourselves, Netflix was always cheaper than Blockbuster. Convenience aside, 60 bucks a game just won't cut it in this imagined "digital only" world. If easy of use were the only thing people cared about, there probably wouldn't even be a Microsoft to make the Xbox anyway. Gamers would all be using Macs.

Microsoft really screwed this up,They are trying to defend something simply undefendable, this system is really a mess, and instead of fixing it they say something like "if you don't have internet buy a 360" or "you cannot lend games, but it's for your safety" It's true that on PC world this is going on for quite some time but, they seem to forget that

1. Steam games are cheaper (lot of promotions, and games won't cost you €60 or €70 at launch)2. Steam allows a complete offline mode.

So I'm aware that steam suffers of some of the same flaws as the X1 but at least is cheap!

Here we have a disc based console that needs to be always online, remove you the commodity of giving a disc to a friend to play it and maybe in ten years will be unable to play games you bought because when ms pulls the plug on their servers you're screwed... not to mention eventual problems at their infrastructure (hacks, ddos, maintenance) that can keep you from playing

Many gamers don't want the Kinect, and having it forced on them is kind of annoying. The Eye for PlayStation is an option which is just another point where Sony has left it up to the Gamer instead of trying to mold there customer base into the business model the company wants. I understand your point, but honestly the eye is a non issue.

Part of the problem with Microsoft's new business model for the Xbox One is that if and when Microsoft decides to stop supporting Xbox Live on the Xbox One is that it will render it and your entire game collection useless. I may be a minority but occasionally I still pull out my NES and Dreamcast to play classic games that never get old, even if the hardware is ancient compared to today's PC's and gaming consoles.

You are most definitely not in the majority. Lots of game collectors feel the exact same way as you do.

Once the dust settles and smoke clears, I think people will warm up to Xbox way more than people here seem to assume.

One thing I don't understand is how come nobody mentions that PS4's $400 price tag doesn't include the Eye camera while Xbox One includes Kinect? It was weird watching pages and pages of people going ape over the news of Xbox price yesterday without any mention of that. Sure I understand some people don't care for Kinect, but I think a lot of people do want the next gen Kinect.

The PS4 + camera is still cheaper, and at least it is optional, so those game players who don't want it don't have to get it.

Kinect is technically very amazing, but the real world uses are less than impressive. At the end of the day I want to veg in the sofa and play games, not dance around or enact moves. And that's what most gamers want. The risk with Kinect in every system is that games start using it just because it is there, not because it is a good idea to use it. The other risk is that it mainly attracts game development along the line that Wii game development want - loads of shoddy party games and normal games using the motion sensors badly.

Many gamers don't want the Kinect, and having it forced on them is kind of annoying. The Eye for PlayStation is an option which is just another point where Sony has left it up to the Gamer instead of trying to mold there customer base into the business model the company wants. I understand your point, but honestly the eye is a non issue.

The addition of a bundled Kinect is the most sensible of all the decisions in the Xbox One. They spent a lot of time and money acquiring the Kinect company/tech and adapting it to consoles. Developers will not develop for an add-on that doesn't have a strong attachment rate, and publishers don't know if people who buy Kinect are in their target audience or not - or even if they are big game consumers at all. The Kinect being attached to every console means developers can finally take advantage of it rather than selling gimmicks based around the device alone.

You can think of this as the similar problem Xbox 360 had at launch by offering a console without a hard drive, as a result they couldn't require an online connection for games nor could they allow developers to require a small game install to speed up caching/streaming of game content to decrease load times. This is a common sense choice - even if you as a gamer don't like it.

Edit: This same concept can be applied to other failed console add-ons like the PlayStation move or Wii's Wii Motion Plus. Great ideas, potentially great tech, but if every potential gamer doesn't have one all you'll get is a few cheap games developed around a gimmick and some half-hearted first-party attempts at easing buyer's remorse for people who did buy in to the add-on.

"This is a big change, consumers don't always love change, and there's a lot of education we have to provide to make sure that people understand"Or in other words, our customers are stupid, we're geniuses. Now pay me, **shole.

Yes, that attitude went down great with those super products known as Bob, winME, WinVista, Win8...

Kyle Orland / Kyle is the Senior Gaming Editor at Ars Technica, specializing in video game hardware and software. He has journalism and computer science degrees from University of Maryland. He is based in Pittsburgh, PA.